Finance For Non-Financial Managers 7th Canadian Ed
Finance for Non-Financial Managers 7th Canadian Ed
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SOLUTIONS MANUAL for Finance for Non-Financial Managers 7th Canadian Edition by Pierre Bergeron Updated A+
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Finance for Non-Financial Managers
SOLUTIONS MANUAL for Finance for Non-Financial Managers 7th Canadian Edition by Pierre Bergeron Updated A+ Chapters 1-12.Chapter 1 OVERVIEW OF FINANCIAL MANAGEMENT Chapter 2 ACCOUNTING AND F INANCIAL STATEMENTS Chapter 3 STATEMENT OF CASH FLOWS Chapter 4 FINANCIAL STATEMENT ANALYSIS Chapter 5 PROFI...
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finance for non financial managers by pierre g ber
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SOLUTIONS MANUAL FOR FINANCE FOR NON-FINANCIAL MANAGERS 7TH CANADIAN EDITION BY PIERRE BERGERON
SOLUTIONS MANUAL FOR FINANCE FOR NON-FINANCIAL MANAGERS, 7TH CANADIAN EDITION BY PIERRE BERGERON (CHAPTERS 1 – 12)
SOLUTIONS MANUAL FOR FINANCE FOR NON-FINANCIAL MANAGERS, 7TH CANADIAN EDITION BY PIERRE BERGERON (CHAPTERS 1 – 12)
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Finance for Non-Financial Managers
7th Canadian Edition by Pierre
Bergeron
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Chapter 1
Overview of Financial Management
REVIEW QUESTIONS
1. Explain the key difference between what financial management focused on in the past
versus today.
In the past, financial management focused primarily on external activities (e.g.,
raising money, acquisitions, legal matters), that is, one segment of the statement of
financial position. Today, although the management of raising money from investors
is still important, financial management has focused increasingly on the other
segment of the statement of financial position, finding ways to manage more
efficiently and effectively all assets of a business, that is, non-current assets and
current assets.
2. What factors of the external environment have an impact on a company’s financial
statements?
All external factors have an impact on a company’s financial statements. They
include economic activities, political activities, world economies, technological
changes, industry activities, and efficiencies related to manufacturing activities.
3. Define financial management.
Financial management means ensuring that a company uses its resources in the most
efficient and effective way to maximize profitability, which ultimately increases the
value of the business.
4. Why is it important for managers to ask questions such as “How are we doing?” and
“How will our business be protected?”
These questions focus on the five major functions of financial management: (1) the
company's overall financial performance; (2) the company's liquidity, or ability to pay
its on-going operating expenses and determine the need to borrow short-term funds;
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(3) how the company's money should be spent; (4) where long-term funding will come
from; and (5) how the business will be protected while maximizing investors' share
value.
5. Differentiate between the role of the treasurer and the role of the controller.
The controller manages how funds are spent and invested by establishing accounting
and financial reporting policies and procedures, maintaining the accounting, auditing,
and management control mechanisms, and analyzing financial results. The treasurer is
responsible for raising funds and managing the liability and equity side of the
statement of financial position.
6. Why should operating managers be responsible for the finance function?
Managers are accountable for their decisions as they impact, directly or indirectly, the
financial performance of their business unit or organization as a whole. They
understand their operating environment, know exactly where they want to go, and
have an appreciation about what needs to be done in order to reach their objectives.
7. What are the four financial objectives? What do they mean?
(1) Efficiency refers to the relationship between assets employed in a business and
profit. (2) Liquidity is a company's ability to meet its short-term financial obligations,
such as paying suppliers, creditors, and employees. (3) Prosperity is growth in all
segments of a business, including revenue, profit, dividend payments, non-current
assets, equity, and working capital. (4) Stability refers to the financial structure of a
business, that is, an appropriate balance between the funds provided by lenders and
those provided by shareholders.
8. Comment on the importance of the “return on revenue” financial objective.
The return on revenue financial objective impacts on the four financial objectives.
Efficiency is improved since there is a direct connection between revenue and profit
(costs as a percentage of revenue go down); liquidity is improved since more cash is
available for spending on working capital such as trade receivables and inventories;
prosperity is enhanced since more cash is also available for spending on all assets
(current and non-current); and stability is also improved since more profit is added to
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the equity side of the statement of financial position.
9. Differentiate between internal financing and external financing.
Internal financing is obtained from retained earnings, that is, profit for the year plus
depreciation/amortization, as well as from reductions in working capital accounts.
External financing is obtained from long-term lenders and shareholders.
10. What are investing decisions and financing decisions?
Investing decisions are related to the acquisition of non-current assets. These decisions
deal with the accounts appearing on the assets side of the statement of financial
position such as non-current assets (e.g., property, plant, and equipment) and
intangible assets. Financing decisions deal with the accounts listed on the liability and
equity side of the statement of financial position, that is, funds borrowed from long-
term lenders and shareholders.
11. What are non-current assets?
Non-current assets are permanent assets such as equipment, machinery, and
buildings.
12. What are working capital accounts?
Working capital accounts are shown on the statement of financial position under the
headings current assets and current liabilities. These current assets (e.g., inventories
and trade receivables) can be converted into cash within a twelve-month period while
current liabilities (e.g., trade and other payables, short-term borrowings) must be paid
within a twelve-month period. All these accounts are part of the cash conversion
cycle and one of the basic objectives of management is to accelerate this cycle.
13. What accounts in the statement of income and the statement of financial position are
included in (a) investing decisions, (b) financing decisions, and (c) operating
decisions?
Investing decisions deal with non-current assets and other assets listed in the
statement of financial position. Financing decisions involve non-current liabilities or
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